- Australian Vanadium (ASX:AVL) and Technology Metals Australia’s (ASX:TMT) merger was finalised on Thursday
- TMT is now off the bourse and AVL remains on the ASX
- AVL shares were down nine per cent in the second hour of trades on Friday
- TMT shareholders were originally reluctant to agree to the merger
- AVL shares last traded at 2 cents
Late last year, I wrote about a then-proposed merger between Australian Vanadium (ASX:AVL) and Technology Metals Australia (ASX:TMT). In that piece, I said – in the headline – that the merger could “shake up” the domestic Vanadium space.
That remains true.
But in these very early days, market response to the merger has been insignificant, and any shaking is clearly going to be the result of a more gradual build-up.
To be fair, AVL – the company that remains on the bourse, with TMT stepping down before the footlamps – didn’t have the luck of the Irish on its side when US markets tanked on Thursday Australian time.
But on a green Friday, AVL shares were down nine per cent to 2 cents in the second hour of trade.
A case of bad timing?
There’s also the issue that vanadium prices don’t have the sex appeal they did during COVID, and definitely not the appeal they had in 2018.
There are two main Vanadium products – vanadium itself, sold in kilograms, currently at A$44.15/kg. In March of 2022, those prices sat above A$80.xx/kg.
But in late 2018, however, those prices reflected nearly A$220.00/kg.
That was whether you were looking at the European or the Chinese prices, which generally have a USD$2.00 difference in Europe’s favour, but, the prices have never meaningfully decoupled.
Then there’s the premium product, vanadium pentoxide, which can readily be incorporated into grid-scale batteries – the market AVL is ultimately seeking to tap.
Dynamics for both remain the same.
After spikes in the late 2000s, 2018, and COVID-19, prices have generally reflected what they do today outside of these anomalies.
And there’s no reason why this pricing can’t be commercial, but, with China still in the economic doldrums, it’s likely that commodity considerations are further informing shareholder restraint.
Shareholder troubles
There’s an interesting history to this merger – TMT had to wrangle its shareholders to approve.
The merger was revealed to be seen as lacklustre by some of the Technology Metals’ investor base – no doubt informed by the fact AVL’s share price at 2 cents is far lower than that which TMT boasted, above 20 cents.
While these data points in themselves do not capture every element of a company’s value and performance potential, at the face level value – which perhaps is more important – the disparity between prices was notable.
But eventually, they got on side. And it’s not like Australian Vanadium hasn’t got a logical business case.
It wants to ultimately produce vanadium for the grid-scale-storage-battery market, where vanadium redox flow batteries are seen as a far superior model to lithium-ion ‘big batteries.’
China remains the global leader in grid-scale redox flow battery manufacture, and reflects a logical market for any Australian vanadium project to export to – but AVL’s Board were more interested in spruiking the potential of sales to America and Europe.
AVL already producing
To that end, whatever may happen, AVL recently launched a WA-based facility which pushed the shares up 13 per cent on the day of announcement.
So, the company is already producing vanadium, or on the cusp of doing so – and it intends to sell the product to Horizon Power, a state-owned utility in WA.
The small first-stage facility is set to produce a nameplate 33MW worth of battery power capacity, in terms of how much vanadium will be prepared at the facility.
It could very well be the case the market is waiting for an off-take deal.
However, this merger hasn’t been enough to excite investors into producing an eyebrow-raising result.
AVL shares last traded at 2 cents.